Technicolor Home Entertainment Services (HES)

Herbert Kalmus, co-founder of Technicolor

     Technicolor is a Hollywood icon, founded in Boston in 1915 to commercialize the inventions of Herbert Kalmus and his partners in color movie production. The company entered the video duplication business in California in 1981 and throughout the 1980s acquired duplication facilities in the US, UK, and Netherlands. The 1990s saw expansion into optical media (CDs and DVDs) as well as further acquisition and construction of video plants in Europe and Mexico. A merger with Nimbus in 1998 made Technicolor the world’s leading manufacturer of optical disks. Acquisition of additional video and optical media capacity in the US, Canada, Europe and Australia took place in 2000 and 2002 (Panasonic Disc Services).

     The name for Technicolor’s media duplication business is Home Entertainment Services, or “HES” for short. The company manufactures and distributes VHS cassettes, DVD video and games, and CDs from 22 locations in North America, Europe, and Australia. Services for content producers span mastering, manufacturing, packaging, and distribution, including direct-to-retail, direct-to-consumer, returns handling, and retail inventory management. Production capacity is over 800 million videocassettes, 850 million DVDs, and 375 million CDs per year.

Our Parent Company, Thomson

     Herbert Kalmus retired from Technicolor in 1960. In 1983, the company was acquired by Ron Perelman’s holding company, MacAndrews & Forbes, for $125 million. After selling off various peripheral units, Perelman grew the core film and videocassette business and then resold the company in 1988 to Carlton Communications in the UK. The company was then acquired by Thomson Multimedia in March 2001.

     Thomson is the nonmilitary side of the denationalization of France’s analog to General Electric. While GE was formed in 1892 by the merger of Thomson-Houston Electric and Edison General Electric in the US, a year later the Compagnie Française Thomson-Houston was formed in Paris. Like its American counterpart, the French Thomson has manufactured a variety of electrical, and later electronic, products for industrial, consumer, and military markets. François Mitterrand’s nationalization sweep in 1982 included Thomson. Five years later, the state-run company purchased RCA and GE’s consumer electronics business from General Electric.

     A 1996 decision to reprivatize Thomson dealt with the company in two parts, Thomson-CSF and Thomson Multimedia. The primarily military Thomson-CSF underwent a series of transactions that led to a change of name to Thales (pronounced “ta-LESS”) in 2000. Thomson Multimedia, at the time primarily in televisions and other consumer electronics, extended its ownership in 1998 and ’99 to include strategic partners, employees, and finally the general public via the Paris and New York stock exchanges. As of May 2003, 21% of the company is still owned by the French government. In 2002, this nonmilitary side of the 109-year-old company was renamed to simply “Thomson.”

Services Offered by Technicolor HES

     The services provided by HES break down into three categories:

• Manufacturing. Replication (duplication) of VHS cassettes, DVDs, and CDs, including printing identifying and promotional labels directly on the cassettes or disks.
• Packaging. Placing a cassette or disk into a paper or plastic box with accompanying wrap (cover graphics), inserts, stickers, and shrink wrap.
• Distribution. Keeping an inventory of finished goods ready for shipment according to the customer’s instructions. This service can include custom packaging.

     While orders for manufacturing and packaging may be combined, orders for manufacturing and/or packaging are handled separately from orders for distribution.

     Media manufactured may be new releases or catalog items. Sometimes a catalog item may be revised or re-released. If the revision is minor, it may remain a catalog item. If new material is added and there is a new marketing push, then it becomes a new release again. The distinction may be (or always is?) determined by the customer.

North American Facilities

     Of 22 HES facilities around the world, nine are in North America. These are indicated in the following map.

North American facilities of Technicolor Home Entertainment Services

     From this map, you can see that there are five locations that manufacture VHS cassettes, three for DVDs, and one for CDs. All sites but one do packaging, and all but two do distribution. Customer Service is handled out of three locations: Camarillo, Livonia, and Pinckneyville.